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Judgment
The applicant bank i.e., Bank of Baroda, Cuddapah filed this Original Application u/s.19 of the Recovery of Debts and Bankruptcy Act, 1993 for recovery of a sum of Rs.1,07,32,158.14 ps from the defendants 1 to 5 jointly and severally with interest @11.65% p.a. with monthly rests from the date of application till the date of realization together with costs and also for sale of OA schedule properties.
The case of the applicant, in brief, is;- that 1st defendant is a partnership firm and defendants 2 and 3 are its partners. At the request of 1st defendant arm represented by its partners, the applicant bank sanctioned cash credit facility of Rs.55 lakhs and further enhanced the limit from Rs.55 lakhs to Rs.95 lakhs. Defendants 1 to 3 executed loan documents. The 4th defendant stood as guarantor for the original limit of Rs.55 lakhs and 5th defendant stood as guarantor for the entire enhanced limit of Rs.95 lakhs. The defendants 4 and 5 created mortgage over OA schedules-A and B immovable properties on 02.11.2011 and 08.03.2013 respectively by deposit of title deeds to secure the loan, The defendants executed letter of acknowledgement of debt on 08.03.2013. After availing the loan facility, the defendants failed to repay the loan dues consequently, the loan account has been classified as NPA. In spite of demands made by the applicant, the defendants did not liquidate the outstanding dues hence, this OA.
The defendants 1 to 5 were served with summons. Of them, the 4th defendant was set ex parte on 30.10.2017 as he was called absent and no representation.
The 5th defendant filed written statement which has been adopted by defendants 1 to 3. The submissions of these defendants, as per the written statement, in brief, are that;- they have no knowledge of enhancement of loan from Rs.55 lakhs to Rs.95 lakhs. Mr. Adhitya, the then Manager of the applicant bank obtained the signature of the 5th defendant as a witness to the loan availed by his friend one Mr. G. Seshu in the year 2013 and misused the same to file the present case. Mr.Adhitya was suspended later. The OA schedule-B property of 5th defendant was not mortgaged to secure the first credit limit of Rs.55 lakhs as the same was disposed in the year 2012 itself. The authorities of applicant bank misappropriated a sum of Rs.87,92,000/- out of the amounts credited to the account of 1st defendant firm by its customers. The amounts were withdrawn by forging signatures on the loose cheques/cash vouchers etc. Such misappropriation caused huge loss to the defendants. The withdrawals as shown in the statement of account are not supported by any instruments/documents/ authorization, The defendants do not owe any amount to the applicant bank in fact the applicant bank has to refund the excess amounts withdrawn by it without authorization along with interest to the defendants and also damages are recoverable from the applicant bank. The OA is liable to be dismissed.
In order to prove its cases, the applicant bank examined C. Venkata Madduleti, Senior manager as AW-1 and marked 17 documents through him as Exs.A.1 to A.17.
In order to substantiate the defence, the 2nd defendant examined himself as DW-1 and marked 3 documents as Exs.B.1 to B.3.
Heard learned counsel appearing for the applicant bank. The right of defendants 1 to 3 and 5 to make oral submissions came to be forfeited as per docket order dated 03.02.2020. Perused the material brought on record.
It is contended by learned counsel appearing for the applicant bank that the 1't defendant is a partnership firm and defendants 2 and 3 are its partners. Defendants 1 to 3 availed cash credit facility of Rs.55 lakhs from the applicant bank and executed Exs.A.2 to A.4 loan documents. The 4th defendant stood as guarantor and executed Ex.A.5 general form of guarantee dated 02.11.2011. He also deposited Ex.A.12 title deeds of OA schedule-A property as a security and confirmed the same under Ex.A.11 memorandum of deposit of title deeds. Subsequently, defendants 1 to 3 approached the applicant bank for enhancement of credit facility from Rs.55 lakhs to Rs.95 lakhs. By considering the request of the defendants 1 to 3, the applicant bank enhanced the cash credit facility from Rs.55 lakhs to Rs.95 lakhs and thereupon defendants 2 and 3 executed Exs.A.6 to A.8 loan documents. The 5th defendant stood as guarantor for the cash credit facility of Rs.95 lakhs and executed Ex.A.9 general form of guarantee and deposited Exs.A.14 and A.15 title deeds of OA schedule-B property as a security and confirmed the same under Ex.A.13 memorandum of deposit of title deeds. Defendants 2 and 3 executed Ex.A.10 letter of acknowledgement of debt dated 08.03.2013. A further contention has been advanced that the debit entries in the loan account dated 18.07.2013, 14.08.2013, 21.09.2013, 18.11.2013 and 01.01.2014 came to be reversed on 22.07.2013, 16.08.2013, 21.09.2013, 18.11.2013 and 02.01.2014 respectively, According to learned counsel, the evidence of AW-1 coupled with recitals in Exs.A.1 to A.17 amply proves the OA claim against the defendants and OA schedule properties and therefore OA may be allowed.
It is the plea of the defendants as could be seen from the averments of written statement and chief evidence affidavit of DW-1 is that Mr. Adhitya, the then Manager of the applicant bank resorted to illegalities in withdrawing the amounts from the accounts of the customers and therefore he was dismissed from the service. According to defendants, an amount of Rs.87,92,000/- has been withdrawn from the account of 1st defendant firm. In a nut-shell, the plea of the defendants is that the 1st defendant Firm is not due any amount to the applicant bank and sought for dismissal of the OA against the defendants and OA schedule properties.
Now, the points that arise for adjudication are:-
i) Whether the applicant bank proved the OA claim against the defendants and OA schedule properties?
ii) To what relief?
Point No.(i):-
Availment of cash credit facility by 1st defendant firm from the applicant bank is not under dispute. Ex.A.5 is the guarantee bond executed by the 4th defendant. Ex.A.9 is the guarantee bond executed by the 5th defendant. The liability of the 4th defendant as per Ex.A.5 guarantee bond is only to the extent of Rs.55 lakhs whereas the liability of the 5th defendant as per Ex.A.9 guarantee bond is to the extent of Rs.95 lakhs. Ex.A.4 is the composite hypothecation agreement dated 02.11.2011 and Ex.A.8 is the supplemental composite hypothecation agreement dated 08.03.2013. AW-1, Senior Manager of the applicant bank speaks of execution of loan documents by defendants.
It is the plea of the defendants that the then Manager Mr.Adhitya made some unauthorized debits to a tune of Rs.87,92,000/-. The applicant bank produced photocopy of cheque issued by the 1st defendant firm for Rs.38,50,000/- and it has been exhibited as Ex.A.17. The original of Ex.A.17 bears the signature of 2nd defendant. It is for the 2nd defendant to explain the circumstances under which he parted with Ex.A.17 cheque. In view of Ex.A.17, the debit entry dated 08.03.2013 cannot be said to be unauthorized. With regard to debit entries made on 18.07.2013, 14.08.2013, 18.11.2013 and 01.01.2014, they have already been reversed. This factual aspect has been stated by AW-1 in his additional evidence affidavit filed on 13.03.2019. For better appreciation, I may refer the relevant paragraphs of additional evidence affidavit of AW-1 and they are thus:
"5. It is submitted that the withdrawal of Cash of Rs.38,50,000/- on 08.03.2013 is as per the instructions of the defendant borrower to meet their day to day business requirements.
It is submitted that the alleged transfer of Rs.14,00,000/- to Mr.G. Seshu on 18.07.2013 was reversed on 22.07.2013.
It is submitted that the alleged transfer of Rs.12,67,000/- to Mr.G. Seshu on 14.08.2013 was reversed on 16.08.2013.
It is submitted that the alleged transfer of Rs.7,00,000/- to M/s Sri Lakshmi Srinivasa Traders on 18.11.2013 was reversed on 18.11.2013.
It is submitted that the alleged transfer of Rs.5,75,000/- to Mrs.G.R. Harshita on 01.01.2014 was reversed on 02.01.2014.
It is submitted that the alleged transfer of Rs.10,00,000/- on 21.09.2013 is to M/s Srimannarayana Industries. It is submitted that the wife of the Defendant No.5 is Proprietor of the said M/s Srimannarayana Industries."
AW-l has offered sufficient explanation for reversal of entries in the loan account on the dates stated supra. with regard to the transfer of Rs.10 lakhs to the account of M/s Srimannarayana Industries, the proprietrix of M/s srimannarayana Industries is no other than the wife of 5th defendant. It is not the case of 5th defendant that the amount of Rs.10 lakhs has not been transferred to his wife's account. Defendants also did not examine wife of 5th defendant to contradict the entry dated 21.09.2O13 with regard to transfer of Rs.10 lakhs to the account of M/s Srimannarayana Industries.
The evidence of AW-1 coupled with recitals in Exs.A.1 to A.17 amply proves the OA claim against the defendants and OA schedule properties. However, the liability of the 4th defendant is restricted to Rs.55 lakhs together with interest thereon. Accordingly, the OA deserves to be allowed.
Point No.(ii):-
In the result, the Original Application is allowed with costs as hereunder:
i) The defendants 1 to 5 jointly and severally are liable to pay to the applicant a sum of Rs.1,07,32,158.14 ps out of which, the liability of the 4th defendant is restricted only to Rs.55,00,000/- with proportionate interest thereon; along with future interest @11.65% p.a. simple from the date of filing of the OA till the date of realization;
ii) The claim of the mortgage/hypothecation the applicant bank is towards realization of its applicant is secured by way of OA schedules-A to C properties and entitled to proceed against the same dues;
iii) The applicant bank is entitled to proceed against the person and properties of defendants towards realization of its aforementioned debt;
iv) The applicant bank is entitled to the costs of the OA.
The applicant bank is directed to file cost memo within 2 weeks from the date of this Order.
Issue Recovery Certificate accordingly.
Communicate a copy of this order to the parties concerned.
(Dictated to the PS, transcribed by him, corrected, signed and pronounced by me in the open court on this the 01st June, 2020).